Only 5 Reasons? That rabbit hole is deep and there are literally hundreds of reasons why it’s difficult to flip houses with no money in California but we’ll stick to my 5 because everything else pretty much emanates from them anyway.
The Cost of Flipping Houses in California
All I can say is Good Luck! Every industry has it cost of entry and while real estate investing is wide open, don’t think for a moment that the cost to jump in is cheap. Certainly there are ways that you can acquire properties that can lessen the blow, but in California, with real estate prices rising, no real growth in new construction and a sellers market, the deck is stacked against you in so many ways. Most people that begin, lack a focus and and understanding of where they can fit in to actually have the biggest impact and find themselves lost in a lot of different processes.
It’s not that the opportunities are not there, it’s that those new to the business dont know how to utilize their time looking for the right deals. They become mired in the minutiae of their own activity. They then become impatient with the process, their inability to make decisions and they end up looking at everything that they can find without matching those individual opportunities with their capabilities. Somewhere along the way most forgot that they need to match their capabilities from a financial and business perspective. The bottom line is you need to find a niche that you are good at and stick to it.
One other thing, as industries grow and mature, so does the cost of entry and no matter when you enter if you dont have any cash you better find someone else that does.
The Lack of Experience
It’s not that this is a bad time to start a business “flipping houses”, but it happens to be one of the most expensive times in history. I have seen most of the late night real estate infomercials designed specifically to offer any viewer complete independence of time and of course unprecedented wealth with no credit and to none of your own money. I am sure that when most people watch, they instinctively question the content and know that by and large it’s nonsense. For the most part they are right, and wrong.
The truth is that without any money you are not going to get very far and yet there are those that have broken all of the conventions and have made it through the startup barriers with very little cash in spite of the odds. I know because when I look back, I am one of those cautionary tales. I had $14,000 in credit, $500 in cash and a lot of debt. What happened next took a lot of old fashioned grit and determination, to make my way through the maze of roadblocks and financial obstacles that were to come.
My name is Peter Westbrook and I am a real estate investor in Stockton, Sacramento and Modesto. For the past 11 years I have been honing my skills in both finding and buying distressed housing. I have helped hundreds of homeowners and families find their own opportunity and exit strategy on houses that became a financial burden to them. I learned that the equity in any house is an asset that can be leveraged for the benefit of both the seller and the buyer. I learned that if your number one priority is helping others get what they want, it will come back to you tenfold.
Most of what I do can be separated into two categories;
- what I do for homeowners
- determining the 2 – 3 possible exit strategies for everyone
Once you have that figured out, every house will reveal itself to you. It’s assets and it’s liabilities. Once you know where everything fits into place you can start to analyze each and that becomes the exit strategies on every side of the transaction. It becomes a conversation with the seller in which you develop a plan to get to the numbers that everyone needs to be whole. When that plan comes together it’s magic. Unfortunately every house has its own circumstances and there is not just one plan. It’s becoming an expert in all of the situations that adds value and allows you a place at the table.
place you can see your way clear to help everyone in or out of the transaction to the finish line. Sure there are natural barriers that are meant to keep people out. First, every transaction involves a high degree of risk, some capital, a commitment, business experience, an understanding of the real estate market, financial moxy, construction experience and whatever experience you bring to the table.
The Barriers Designed to Keep You Out
The barriers to entry are numerous. By design they are supposed to be that way. It takes work and if you are going to unseat the current set of real estate investors you have to create a game plan for your self. The notion that those that already have businesses are just going to move aside is preposterous. They are going to compete for the business and their experience is going to win most of the time. Don’t worry though, they cant buy everything and at some point you can find your opening. It will most likely be on the fringes and it maty even cost you a little more, but it can be done.
The market Condition Matters
In 2008 and 2009 at the bottom of the crash, the point of entry was al lot easier or was it? Foreclosed or Vacant houses were everywhere, it was a buyers market… but you needed cash because banks were not lending money. Real estate financing for investment purposes was dead. Hard money lenders were rethinking their strategies. The Lending in America was like the no Fly Zone in America the day after 911. The cost of entry was a at a 50% discount, but if you didn’t have any money you needed to creatively create it and so different strategies were created that worked and that generated cash flow and that allowed you to creatively acquire houses on a shoestring.
It was a buyers market Homeowners that needed to sell were flexible
I believe that life is a set of self fulfilling prophecies. Your beginning, if you believe that way can dictate the course of your entire life. But for some, the beginning is just a starting point, a launch pad for anything and everything that we can see and dream as possible. You get to shape and mold your individual future everyday and part of that process is making choices and decisions all with whatever dreams and goals that you have in mind.
Some people’s aspirations are larger than others and sometimes even those least likely awaken and find themselves in situations that challenge themselves to begin to think bigger than they ever have before. Sometimes it’s a nudge and other times they’re just thrust into real life situations that force them to react in ways that they dint know were possible.
Either way… it is an awakening. It’s a glimpse of what can be if you just make a commitment, bear down and know that you can accomplish what you set out to do. You naturally encounter twists and turns, while at the time, they may seem unsettling, harrowing and impossible, they are your training and create your ongoing tenacity and grit. You earn your stripes by aiming high, by sometimes miscalculating and especially by making mistakes. But most important it is the learning that that adversity provides. There is the real value. Before you know it, the sum of all of your mistakes and failures become the stripes that you have earned that fuel of your incredibly successful future.
I am one of the unwashed and unsettled insomniacs that are willing to believe and dream that someday it could be me. I have complete empathy for every other like minded entrepreneur that believes that they can make a better mousetrap. I have empathy because I have lived both lives and I have desperately wanted out from underneath what I was then doing…
So what is it about the intrigue of flipping houses that makes anyone believe that they can just hang out a shingle one day and be in business? Is it that the TV shows have made it all look very simple? Aren’t there other steps involved? Construction Classes? Real Estate Classes? Buying and Selling Classes? Business Training classes?
Here is the cold water right now…. It doesn’t matter that you have you’ve always wanted to get into the house flipping business, because you have no idea where to start without any money? I know the infomercials tell you… “Don’t worry, people do it all the time”!
Really? All of the time? Really!
It is true that many people were able to start with nothing and build their own real estate business from the ground up! But in this article we will discuss the 5 reasons why it’s difficult to flip houses with no money in California.
1) It is a Business… It’s Supposed to be Difficult:
Did you really start reading and think that it was supposed to be easy. There is no blue print or script for you to learn how to deal with people that are in crisis. It is either something that is innately there or not. Everyone has their strengths. You might think this sounds impossible, but people do it every day. If you want to flip houses with no money, you will need to do your homework and educate yourself on the process and what methods of funding are going to be the best option for YOU!
You should create a business plan outlining exactly how you intend your house flipping venture to work.
2) Others People’s Money
Find Some Partners
Think about who you know who may want to invest. Even think about people you don’t know, but could pitch your investment idea to. This could be a friend, family member, business associate or possibly another real estate investor who would be willing to partner with you.
Once you have shared your strategy with your prospective partner, you can arrange for them to finance the deal, while you do all the work to get the job done.
Loans – Hard Money & Private
Getting a loan, whether hard money or through a private lender can be a great strategy for securing the cash you need to make a property investment. A private money loan is a great method as there are many people out there, with money just sitting in their bank accounts, waiting to invest with you.
They just don’t know it yet. If you can present a tangible plan and reasons why they should invest with you, you will be able to find a private money lender who is ready to invest with you.
A hard money loan is also a great way to get the cash you need fast. However, the thing with hard money loans is that they often come with a high-interest rate as well as points. Because of the high-interest rates, hard money loans are great for a property you know you can flip fast.
They allow you to get the money you need quickly, just ensure you pay it back as soon as possible.
Use What You Got
Even if you don’t have an abundance of cash at your disposal, you might have other assets you can use to secure the financing you need.
You can use a home you own, your IRA or retirement accounts and even your 401k to help get a line of credit. If you tap into any of these accounts for a down-payment, beware of the associated risks, and tax penalties for pulling out money early.
3) Rules and Regulations
4) The Art of Negotiations
5)
Mix & Match
Even if you can’t get all of the funding you need using the methods above, you can mix and match the methods to achieve your goals.
Maybe a rich aunt will loan you part of the down payment, and you are able to pull the remaining amount from an IRA. Or maybe you partner with an avid local investor, only investing a small amount you borrowed through a hard money loan.
However, you decide to invest, do your research and keep in mind all of the potential streams of credit that might be available to you!
Are you ready to begin your adventure flipping houses? Our awesome team can help you get started today! Click here to fill out our form, or give our office a call today! (209) 481-7780